Foster Kiat Esemka, not Proton

published @ The Jakarta Post

President Joko “Jokowi” Widodo has been yearning for a national car since he served as mayor of Surakarta, more commonly known as Solo. Back then, he promoted Solo’s vocational-student made car, the Kiat Esemka. This idea made headlines again during his recent visit to Malaysia. In a bid to develop its own national car, an obscure Indonesian car company led by the President’s party clique will cooperate with the Malaysian government-backed Proton.

Proton is the brainchild of Malaysia’s most revered leader, Mahathir Mohamad. Unlike Indonesia, which has let foreign-brand cars rule the roost in the domestic market without any concession, Malaysia applied a different strategy. Since his early years in power, Mahathir has been determined that Malaysians would master automobile technology and produce their own national brand.

Purportedly, in exchange for participation in a liquefied natural gas (LNG) project in Sarawak, Japan’s Mitsubishi had to transfer its automobile technology to support Malaysia’s car brand, Proton. So, in 1985 the first Malaysian national car, the Proton Saga, was launched bearing a strong resemblance to the Mitsubishi Lancer. Even if this was, in fact, a Japanese-made car, Malaysians dominated the management team and Malaysia has its own brand to be proud of.

The most stirring lessons learned from Proton is that the Malaysian government’s role was key to growing the automobile company. And rather than reinventing the wheel or getting technology transferred, Proton obtained its technology from Mitsubishi and Lotus through shrewd negotiation of exchanging natural resources with high technology and acquisition.

This brings us back to the plan of reviving Indonesia’s national car.

In my opinion, Indonesia should emulate Malaysia’s strategy. But it is of no value that this must be done through cooperating with Proton. Inviting Proton is the same as inviting Toyota, Honda, Suzuki etc.

Proton will be another foreign-brand car benefitting from Indonesia’s market, but this time it will be backed by Indonesia’s government.

It’s also detrimental to the hoped-for national brand.

Better yet, Indonesia could build its national car on its own. Bear in mind that in 1993 the son of then president Soeharto established a national car company, Timor. Back then, Timor was exactly the Indonesian version of Proton. Timor had nothing but the management team and the brand. The car was equipped with machinery from South Korea’s Kia. Later, the company vanished following the fall of Soeharto.

Once there is hype surrounding the Kiat Esemka, contributed to by President Jokowi, the government must back, inject funds and grow this domestically made car. Once a national car has been produced, the Indonesian government must support it by giving it a leg up in both the domestic and export markets and ensure its survival.

Delving into history, this strategy has been applied stretching back to the founding of Toyota in 1933. In 1939, Japan kicked out America’s General Motors and Ford from Japan’s market to foster domestic car manufacturers. But Toyota still faced heady years. In 1949, the struggling Toyota was bailed out by the Bank of Japan. And the rest is history.

Finally, hats off to Malaysia’s strategy in raising Proton, however, developing an Indonesian national car with Proton has neither rhyme nor reason.

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Reading Megawati's Tweets

published @ The Jakarta Post

I confess that I had been one of Megawati Soekarnoputri’s critics, based on her short presidential stint in 2001–2004. Unlike her much-revered father, founding president Sukarno, she did not deliver good, interesting speeches. The content of her speeches was mostly dull, and worse, some of her policies were controversial, such as divesting the state-owned telecommunications company, Indosat, and selling cheap gas from the Tangguh field to China. 

Although these have drawn criticism since she was in office, I have never heard her defend herself. Only her Indonesian Democratic Party of Struggle (PDI-P) supporters have tried to make unsatisfactory rebuttals. We may all think that she has no answers and is barely able to think independently. In which case, she implemented these policies because her ministers or advisers told her to do so. Until recently, she had put up quite a convincing case in this regard via the social media site, Twitter. 

She tweeted explanations of her controversial policies regarding Indosat and Tangguh gas on her Twitter account, @MegawatiSSP. 

After taking the helm after president Abdurrahman “Gus Dur” Wahid, Megawati faced a budget shortage. There was also money owing to the International Monetary Fund (IMF). In addition, the country’s military equipment, including warships and fighter jets, were aging. The US had not only embargoed military spare parts due to the Dilli Santa Cruz massacre in East Timor, but it had also stationed one of its aircraft carriers at the intersection of the Java Sea and Timor Sea, infringing Indonesia’s maritime territory. The Indonesian Military (TNI) was powerless and could do nothing.

To address this, Megawati decided to divest valuable state assets, of Indosat and several other state-owned enterprises. After filling its coffers, the government paid off its IMF debt and bought military weapons from Russia and Poland, such as Sukhoi fighter jets and helicopters. New barracks for military personnel were also built and existing barracks repaired to improve morale. 

At the same time as improving its military hardware, the government launched soft power initiatives through intensifying diplomatic ties with Russia, China, North Korea and Eastern European countries. This sent a strong and clear message to the US on which bloc Indonesia was in if the former’s aircraft carrier kept sailing in our territory. 

Another source of money the government had was the Tangguh gas field. Unfortunately, China was the only potential buyer and investor for exploitation, as Indonesia was competing against another supplier, Russia. All things considered, the only way to convince China to establish the plant and buy the gas was to offer low prices with strings attached. 

China would assist the government in establishing power plants, access roads to villages and megaprojects, such as bridges and ports. And the price would be reviewed in five years’ time after the first eight years. Another heart-touching requirement was that China had to help 1.2 million starving North Koreans.

After reading all her tweets, I suddenly saw Megawati differently and accepted her accounts. This does not necessarily mean that she introduced the best policies compared to other alternatives. But she has given us an insight into why she reached those decisions, basing them on several understandable and plausible considerations. Megawati may be a bad communicator, but she is not an entirely bad decision maker.

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Nationalist in Free Market Era

published @ The Jakarta Post

Indonesian Democratic Party of Struggle (PDI-P) politicians have befuddled us many times. They seem to emphasize nationalism, the need for a people’s economy, but sometimes their policies contradict the ideologies they tout.

During Megawati Soekarnoputri’s 2001-2004 stint, she made many blunders in regard to nationalism. First, she divested the government’s majority share at Indosat, a state-owned company, to foreign firm Singapore Technologies Telemedia (STT). The government not only sold a lucrative company but put national security at risk.

Second, she sold Tangguh natural gas at a cheap price to China via a long-term contract. She fiddled away a big source of big government funding to satisfy national ambition. Third, she sold the Pertamina-made very large crude carriers (VLCC). The vessel was codesigned by Indonesians and it would have given Pertamina an advantage. Recently, Jakarta Governor Joko “Jokowi” Widodo made the same mistake by buying Chinese-made articulated buses instead of those domestically made by PT Inka for the Transjakarta fleet. Those Chinese-made buses were found to be rusty and damaged. Procedurally speaking, what Jokowi’s administration has done is not wrong.

The provision of buses was undertaken through a competitive international tender. The products that fulfill the right specifications and offer them at the cheapest price should be awarded the tender. Unfortunately, Inka’s articulated buses lost to China’s. Inka, however, still provides Transjakarta single buses. Inka also previously lost to a Chinese company in Soekarno-Hatta International Airport’s commuter line tender.

The tender is under investigation but Chinese products are a threat to almost all national products. Jokowi, who is tipped to be Indonesia’s next president, must pay attention to this. National products have to be championed. And the lessons learned from China’s auto industry, which dominates the global auto industry, in relatively short terms must be drawn.

In fact, the Chinese government intervene in the industry through state-owned automakers. It strengthens its domestic automakers; it regulates the transfer of technology from foreign automakers through joint venture; and, ultimately, it develops a Chinese brand.

In contrast, Indonesian leaders abandoned the potential of its state-owned automaker. In 1965, Sukarno uttered the vision of berdikari (stand on our own feet — self reliance). Former president Soeharto forged this policy through establishing strategic industries. Inka is a state-owned company specializing in rolling stock and automotive manufacturing. If we can produce things on our own, why are buying from China?

Indonesian leaders, including Jokowi, seem naive when it comes to free-market implementation. Historically, almost all nations, including the UK, US and Japan, protected their own industries in the early years of industrialization.

Finally, in contrast with the stale economics textbook, the state can regulate the market for its own interests. As market law goes: “market is great as long as you win.”

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Produce Our Own National LCGC

@The Jakarta Post

President Susilo Bambang Yudhoyono signed the government regulation on low-cost green cars (LCGC). The policy aims to reduce carbon emissions by decreasing fossil fuel consumption. This low cost emanates from the elimination of luxury-goods sales tax. And the types of green cars are electrical cars, hybrids, biofuel-based cars and compressed natural gas (CNG) cars. Can this policy expect any results? The answer is absolutely no. This policy is not only unable to reduce carbon emission, but will discourage our national automotive industry as well.

Kiat Esemka: Hoped-for National Car?

Published 10/1/2012 @ Jakarta Post http://www.thejakartapost.com/news/2012/01/10/letter-kiat-esemka-hoped-national-car.html

Solo Mayor, Joko Widodo makes headlines again. With splashy action, he replaced his official vehicle, Toyota Camry with vocational student-made, Kiat Esemka. It suddenly rekindles the long awaited national car. And it draws both supports and criticisms.

Truth be told, Kiat Esemka has neither been long tested yet nor prepared for mass production. Solo Mayor, who in fact has good intention, is too fast to make it his official car.

Many also question who really design and build the engine as the important part of the car. Does it the solely wolishe rk of vocational students? Or does it imitate other manufacturer? Or do they buy it from other countries such as China?

Indonesia Can Nationalize Freeport!

Some of us might think it is a crazy idea to nationalize foreign concerns who have invested much money here. That’s an unprecedented dodgy action and unachievable, because it infringes a business contract. And the unintended consequence is foreign investors will shy away from doing business in Indonesia.

Is this true?